Editor's Note: An earlier version of this alert listed $1.25 as the maximum entry price for the NKE April 17th $90 Covered Call. Readers should instead enter the NKE April 17th $90 Covered Call for a minimum price of $1.25. The alert below has been adjusted to reflect this correction. Is a V-Reversal Likely? Dear Savio, The last week has been good for stocks. In fact, last week's gains were the best in percentage terms over the last 11 years, but does that mean the market's reversal will continue to look like a V? A great example of a V-reversal was the bear market at the end of 2018, when traders oversold a market that still had solid fundamentals. The current situation is a lot softer since we can't expect consumer behavior to revert to normal in the short term. In our view, a W-shaped reversal or a longer consolidation like we saw in 2010 and 2011 is much more likely. If we are correct about the low likelihood of a perfect V-reversal, then we should be looking to sell calls when the market reaches highs. Timing those trades is tricky but slowing momentum should give us a good clue for where those short-term tops are located. Therefore, we are recommending a change to our Nike (NKE) trade today. Specifically, we recommend you… 'Sell to open' the NKE April 17th $90 Covered Call (NKE200417C00090000) for a minimum price of $1.25. We like NKE, and more importantly, we loved NKE's most recent earnings report. The data was better than expected and showed some recovery of demand in China. That information should help us refine plans for the trajectory of other Western markets, including the U.S. However, we don't think the current rally is likely to be uninterrupted. There is a key inflection range for NKE between $86 per share and $89 per share, and we think that range will act as a resistance level. That's why we recommend selling calls with a strike just above that level to harvest some income from the stock while we wait for further recovery. 
There are a lot of advantages for option sellers right now, including very high premiums. However, the same volatility that has boosted premiums is also increasing the bid-ask spread. We always recommend being very picky about the potential fill price on the options and using a limit order between the bid and ask price. Here's How the Trade Can Work Out…
Instant income: With this covered call, we plan to collect an instant income payment of at least $125 per contract.
Calls expires out of the money: If NKE's stock price remains below our $90 strike price at expiration on April 17, the calls will expire worthless, allowing us to keep the $125 per contract we receive for selling this option. That's a return of 1.26% in just 17 days, or an annualized return of 27.13%.
In this case, we will still own the stock shares and can continue writing covered calls against them for further income.
Calls expires in the money: If NKE's stock price is above our strike price at expiration, you will have 100 shares of NKE "called away" from you at $90 per share.
Having the shares called away from us will then allow us to start selling put writes against the stock in the future for additional income. You will also get to keep the $125 per contract you earned by opening this trade.
If you do not want to have your shares called away from you, you will need to "buy back to close" the call before expiration on April 17. We'll keep you posted as the trade progresses.
| Nike (NKE) common stock was trading for approximately $84.77 per share at the time of this alert. Long-Term Focused Strategic Positions: Right now, we only recommend selling the following covered calls if you are already holding the underlying stock. We are not recommending our common stock positions for new entries at this time. If you haven’t already entered the following and can still get in for a price at, or better than, our recommended minimum/maximum, we still recommend entering: - Covered Call: (Short) CSCO April 17th $42.50 Covered Call (CSCO200417C00042500) for a minimum of $0.80.
- Covered Call: (Short) KO April 17th $47.50 Covered Call (KO200417C00047500) for a minimum of $0.40.
- Covered Call: (Short) DIS April 17th $110 Covered Call (DIS200417C00110000) for a minimum of $0.43.
- Covered Call: (Short) MSFT April 17th $175 Covered Call (MSFT200417C00175000) for a minimum of $1.75.
- Covered Call: (Short) KO April 17th $47.50 Covered Call (KO200417C00047500) for a minimum of $0.40.
- Covered Call: (Short) TGT April 17th $120 Covered Call (TGT200417C00120000) for a minimum of $0.45.
We are still holding the following strategic trades, but either the current value of the short option or the price action of the stock itself don't warrant entering a new trade at this time. If you haven't already entered these trades, we recommend waiting until further notice before opening a new position: - Covered Stock: Ball Corporation (BLL) common stock -- part of the BLL covered call position.
- Covered Stock: Cisco Systems (CSCO) common stock -- part of the CSCO covered call position.
- Covered Stock: Coca-Cola Company (KO) common stock -- part of the KO covered call position.
- Covered Stock: Microsoft (MSFT) common stock -- part of the MSFT covered call position.
- Covered Stock: Target (TGT) common stock -- part of the TGT covered call position.
- Covered Stock: Walt Disney Company (DIS) common stock -- part of the DIS covered call position.
- Covered Stock: Nike (NKE) common stock -- part of the NKE covered call position.
If put-writes and buy-writes are new strategies for you, be sure to check out our Resources page for more information. For more on these trades, be sure to attend our next weekly webinar Wednesday at 8 p.m. ET. Sincerely, 
John Jagerson and Wade Hansen
Editors, Strategic Trader
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